Guys, I am at my mid-20s and I would like to ask how does this insurance thing usually go about?
As usual, when I try to find out more about insurance, all the agents and even friends who work as insurance agent offers me nothing but ILP which I dont see it as something I need at all. (low coverage, high cost and they try to mixed up the accounting concepts of insurance being expenses, investment being assets together. imo assets and expenses can never be together)
There are some plans where I find them interesting but would also like to know what most of you actually buy.
I saw some multiplier plans where it covers a significant amount for wholelife but the premium payment is term period of 20 years. After age of 65, death benefit reduce by half or so.
Do you guys also get something similar first, before getting more additional term plan to up the coverage?
Also, do u guys 1 shot buy high coverage of insurance to lock the premium when young ? Or just pay the extra premium incur at older age when we really need that certain amount of coverage?
In the past, 1990s and early 2000s, investment options were limited and hence "all-in-one" policies like whole life and ILP were prevalent. In whole life and ILP, the premium you pay consists of investment+insurance charges+others. The difference between whole life and ILP is for ILP, you pick the funds and for whole life, it participates in the insurer's common participating fund.
Now from later part of 2000s till now, there are much more investment options and you can easily build up your own fund to sustain the insurances charges from Term Policies.
Generally, for young kids say <10 yo, its more common to buy whole life policies with multipliers because of two reasons. First, the premium is relatively affordable and second, there's potentially a very long time to accumulate/earn the participating bonuses.
For young working adults in early 20s, if you are in at least a fairly promising job and you foresee yourself to have say a family and couple of properties several years down the road, then its better to buy those S$1m term policies to 99/100 yo. Let's take an example of a 25 yo female, term to 99 cover for death and tpd only. The premium is about S$1600 per annum. Appx S$20k of reits can generate enough dividend for this already. So in the event of death, the payout is S$1m and there's still the S$20K+- worth of reits. But for a grand total of S$20K, what can ILP or whole life policy give/cover you? Maybe a sum assured of $80K assuming you buy TM Legacy 5 year premium payment.
So to answer your question:
1. You must understand how much cover you want. High coverage like S$1m term plan is very common nowadays.
2. You must understand how long you want to be covered. Generally for those with family and children, its up to 100/99yo (Legacy Planning reason) and for those who are single/unmarried, its up to where their liabilities (e.g mortgage loan) are about to end. There are of course family with children who decides to have term plan ending at 65 yo - but really, this is up to individual's planning.
